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FORWARD-LOOKING STATEMENTS
This report, including documents which are incorporated by reference, and other documents which we file periodically with the Securities and Exchange Commission (SEC), contains statements that may be considered to be “forward-looking statements.” Such statements relate to our predictions concerning future events or operations and are within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are inherently uncertain, subject to risks, and should be viewed with caution. These statements are based on our belief or interpretation of information currently available. Stockholders
and prospective investors are cautioned that actual results and future events may differ materially from these forward-looking statements as a result of many factors. Some of the factors and events that are not within our control and that could have a material impact on future operating results include: general economic and business conditions, competition and competitive rate fluctuations, cost and availability of diesel fuel, ability to attract and retain qualified drivers and delivery personnel, a loss of one or more major customers, interference with or termination of our relationships with certain railroads, insurance costs and availability, claims expense, retention of key employees, terrorist attacks or actions, acts of war, adverse weather conditions, new or different environmental or other laws and regulations, increased costs for new revenue equipment or decreases in the value of used equipment and the ability of revenue equipment manufacturers to perform in accordance with ag
reements for guaranteed equipment trade-in values.
You should understand that many important factors, in addition to those listed above, could impact us financially. Our operating results may fluctuate as a result of these and other risk factors or events as described in our filings with the SEC. Some important factors that could cause our actual results to differ from estimates or projections contained in the forward-looking statements are described under “Risk Factors” in Item 1A. We assume no obligation to update any forward-looking statement to the extent we become aware that it will not be achieved for any reason.
ITEM 1. BUSINESS
OVERVIEW
We are one of the largest surface transportation, delivery and logistics companies in North America. J.B. Hunt Transport Services, Inc. is a publicly held holding company that, together with our wholly-owned subsidiaries, provides safe and reliable transportation and delivery services to a diverse group of customers and consumers throughout the continental United States, Canada and Mexico. Unless otherwise indicated by the context, “we,” “us,” “our” and “JBHT” refer to J.B. Hunt Transport Services, Inc. and its consolidated subsidiaries. We were incorporated in Arkansas on August 10, 1961, and have been a publicly held company since our initial public offering in 1983. Our service off
erings include transportation of full truckload containerized freight, which we directly transport utilizing our company-controlled revenue equipment and company drivers or independent contractors. We have arrangements with most of the major North American rail carriers to transport freight in containers or trailers. We also provide customized freight movement, revenue equipment, labor, systems and delivery services that are tailored to meet individual customers’ requirements and typically involve long-term contracts. These arrangements are generally referred to as dedicated services and may include multiple pickups and drops, local and home deliveries, freight handling, specialized equipment and freight network design. Our local and home delivery services typically are provided through the use of a network of cross dock service centers throughout the continental United States. Utilizing a network of thousands of reliable third-party carriers, we a
lso provide comprehensive transportation and logistics services. In addition to dry-van, full load operations, these unrelated outside carriers also provide flatbed, refrigerated, less-than-truckload (LTL) and other specialized equipment, drivers and services. Our customer base is extremely diverse and includes a large number of Fortune 500 companies.
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We believe our ability to offer multiple services, utilizing our four business segments and a full complement of logistics services through third parties, represents a competitive edge. These segments include intermodal (JBI), dedicated contract services (DCS), full-load dry-van (JBT) and integrated capacity solutions (ICS). Our business is somewhat seasonal, with slightly higher freight volumes typically experienced during August through early November. Our DCS segment is subject to somewhat less seasonal variation than our other segments. For the calendar year ended December 31, 2010, our consolidated revenue totaled $3.8 billion, after the elimination of intersegment business. Of this total, 56% was gener
ated by our JBI business segment, 24% by DCS, 12% by JBT and 8% by ICS.
Additional general information about us is available on our Internet web site at www.jbhunt.com. We make a number of reports and other information available free of charge on our web site, including our annual report on Form 10-K, our proxy statement and our earnings releases. Our web site also contains corporate governance guidelines, our code of ethics, our whistleblower policy, Board committee charters and other corporate policies.
OUR MISSION AND STRATEGY
We forge long-term partnerships with key customers that include supply chain management as an integral part of their strategy. Working in concert, we drive out cost, add value and function as an extension of our customers’ enterprise. Our strategy is based on utilizing an integrated, multimodal approach, to provide capacity-oriented solutions centered on delivering customer value and industry-leading service.
RECENT FOCUS
We continually analyze where we believe additional capital should be invested and management resources should be focused to provide added benefits to our customers and leverage the services of our business segments. These actions should in turn, yield increasing returns to our stockholders. Unacceptable returns in certain areas have recently caused us to reduce the size of certain business segments and grow others.
Examples of our recent actions include the focus on growth of capacity associated with the JBI segment and continued contraction of the JBT business segment. We have also concentrated on the development and operation of one of the largest nationwide, final mile cross dock networks that consists of approximately 90 service centers supporting local commercial and home delivery activities within our DCS business segment. This network supports our goal to provide best-in-class services that increase delivery and replenishment service offerings to both residential and commercial locations.
Increasingly, our customers are seeking energy-efficient transportation solutions to reduce both cost and greenhouse-gas emissions. Our intermodal service addresses both demands. Further, we are customizing dedicated solutions aimed at minimizing transportation-related carbon emissions. Efforts to improve fleet fuel efficiency are ongoing, and we are an Environmental Protection Agency (EPA) SmartWaySM Transport Partner.
As always, we continue to ingrain safety into our corporate culture and strive to conduct all of our operations as safely as possible.
OPERATING SEGMENTS
Segment information is also included in Note 13 to our Consolidated Financial Statements.
JBI Segment
The transportation service offerings of our JBI segment utilize arrangements with most major North American rail carriers to provide intermodal freight solutions for our customers throughout the continental United States, Canada and Mexico. Our JBI segment began operations in 1989 forming a unique partnership with what is now the BNSF Railway Company; a watershed event in the industry and the first agreement that linked major rail and truckload carriers in a joint marketing environment. JBI draws on the intermodal services of rail carriers for the underlying linehaul movement of its equipment between rail ramps. The origin and destination pickup and delivery services (“drayage”) are handled by our company-owned tracto
rs for the majority of our intermodal loads, while utilizing third party dray carriers where economical. By performing our own dray services, we are able to provide a cost competitive, seamless coordination of the combined rail and dray movements for our customers.
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JBI operates 45,666 pieces of company-controlled trailing equipment systemwide. The fleet is primarily comprised of 53-foot, high-cube containers and is designed to take advantage of intermodal double-stack economics and superior ride quality. JBI also manages a fleet of 2,592 company-owned tractors and 3,198 company drivers that maintain our high service standards. At December 31, 2010, the total JBI employee count was 3,533. Revenue for the JBI segment in 2010 was $2.14 billion.
DCS Segment
DCS specializes in the design, development and execution of supply chain solutions which support a variety of transportation networks. Our designs are developed and customized to provide assigned equipment and labor, industry-leading service levels, optimum efficiency, and cost-savings management. DCS focuses on final mile delivery, replenishment, and specialized services supporting private fleet conversion, dedicated fleet creation and transportation system augmentation. We have continued to expand our specialized service offerings in the final mile delivery services with approximately 90 cross dock locations to date. Our operations are managed on site by transportation professionals who work in concert daily with cus
tomers and delivery specialists to ensure safe and cost-effective delivery. Operations are governed by longer-term contracts that typically include fixed cost components and fuel surcharge programs on round-trip miles.
At December 31, 2010, this segment operated 4,259 company-owned trucks, 357 customer-owned trucks, and 23 independent contractor trucks. The DCS segment employed 6,355 people at December 31, 2010. DCS revenue for 2010 was $907 million.
JBT Segment
The service offering in this segment is full-load, dry-van freight, utilizing tractors operating over roads and highways. We typically pick up freight at the dock or specified location of the shipper and transport the load directly to the location of the consignee. We use our company-owned tractors and employee drivers or independent contractors who agree to transport freight in our trailers.
At December 31, 2010, the JBT segment operated 1,697 company-owned tractors and employed 2,217 people, 1,865 of whom were drivers. At December 31, 2010, we had 891 independent contractors operating in the JBT segment, some of whom were leasing company-owned tractors. JBT revenue for 2010 was $479 million.
ICS Segment
ICS provides non-asset, asset-light, and transportation logistics solutions to customers through relationships with thousands of third-party carriers and integration with our owned equipment. By leveraging the J.B. Hunt brand, systems and network, we provide a broader service offering to customers by providing flatbed, refrigerated, expedited and LTL, as well as a variety of dry-van and intermodal solutions. ICS provides single-source logistics management for customers that desire to outsource their transportation functions and utilize our proven supply chain, technology, and design expertise to improve efficiency. ICS operates outside offices as well as on-site logistics personnel working in direct contact with customers.
At December 31, 2010, the ICS segment employed 329 people, with a carrier base of approximately 25,600. ICS revenue for 2010 was $291 million.
Marketing and Operations
We transport, or arrange for the transportation of, a wide range of freight, including general merchandise, specialty consumer items, appliances, forest and paper products, food and beverages, building materials, soaps and cosmetics, automotive parts, electronics, and chemicals. Our customer base is extremely diverse and includes a large number of Fortune 500 companies. Our ability to offer multiple services, utilizing our four business segments and a full complement of logistics services through third parties, represents a competitive advantage. We provide a broad range of transportation services to larger shippers that seek to use a limited number of “core” carriers and those that desire a provider of complementary
services as a way to meet all of their supply chain needs.